Brevan Howard Digital CIO: Digital assets need 24/7 ops

Chris Rayner-Cook, chief investment officer at Brevan Howard Digital, told reporters that running digital asset strategies requires continuous trading operations and the ability to manage a fragmented market structure.

A recent industry report surveying hedge fund managers found more than half of respondents have no plans to allocate to digital assets, while about 10% are exploring the space without committing capital.

Rayner-Cook identified two operational challenges that set digital assets apart from traditional markets: nonstop trading activity and markets spread across many venues with different rules and connectivity.

Continuous trading requires systems for round-the-clock market surveillance, risk monitoring and trade execution. Firms must be able to respond to price moves and operational issues at any hour.

Markets for tokens operate on multiple exchanges and trading venues. Differences in liquidity, order routing, fees and access rules increase the work needed to price, hedge and settle positions.

Custody and settlement add further operational demands. Custody models vary in maturity and approach, and settlement processes are not uniform across venues, creating extra reconciliation and control tasks.

Risk management changes in a 24/7 environment. Firms need models that cover price moves outside typical business hours and procedures to aggregate market data from multiple sources to produce reliable pricing and detect arbitrage or failures. Assessing counterparty and execution risk can be harder when trades route across varied platforms.

The report found that some hedge funds are building in-house teams and technology to meet nonstop trading requirements, while others are waiting for clearer standards on custody, market access and regulation. A minority of managers have already allocated to digital assets; most remain cautious.

Rayner-Cook observed, “Digital assets are not simply traditional markets with a different set of instruments.” He added that the operational demands of continuous trading and fragmented infrastructure are what running digital asset strategies requires.

Service providers and industry participants are developing trading, custody and data solutions intended to reduce operational friction. The industry report states that until those gaps narrow, a substantial share of hedge funds will refrain from making material allocations.